Prepare a statement of cash ﬂows using the indirect method.

Directions: Answer the following questions on a separate Microsoft Word or Excel document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in Blackboard.

Exercises

E13-3. Cushenberry Corporation had the following transactions.

1. Sold land (cost \$12,000) for \$15,000.

1. Issued common stock at par for \$20,000.

1. Recorded depreciation on buildings for \$17,000.

1. Paid salaries of \$9,000.

1. Issued 1,000 shares of \$1 par value common stock for equipment worth \$8,000.

1. Sold equipment (cost \$10,000, accumulated depreciation \$7,000) for \$1,200.

Instructions

For each transaction above, (a) prepare the journal entry, and (b) indicate how it would affect the statement of cash ﬂows using the indirect method.

E13-4. Gutierrez Company reported net income of \$225,000 for 2015. Gutierrez also reported depreciation expense of \$45,000 and a loss of \$5,000 on the disposal of equipment. The comparative balance sheet shows a decrease in accounts receivable of \$15,000 for the year, a \$17,000 increase in accounts payable, and a \$4,000 decrease in prepaid expenses.

Instructions

Prepare the operating activities section of the statement of cash ﬂows for 2015. Use the indirect method.

Problems

P13-3A.The income statement of Whitlock Company is presented here.

1. Accounts receivable increased \$200,000 during the year, and inventory decreased \$500,000.

1. Prepaid expenses increased \$150,000 during the year.

1. Accounts payable to suppliers of merchandise decreased \$340,000 during the year.

1. Accrued expenses payable decreased \$100,000 during the year.

1. Operating expenses include depreciation expense of \$70,000.

Instructions

Prepare the operating activities section of the statement of cash ﬂows for the year ended November 30, 2015, for Whitlock Company, using the indirect method.

P13-7A.Presented below are the ﬁnancial statements of Nosker Company.

1. Dividends declared and paid were \$20,000.

1. During the year equipment was sold for \$8,500 cash. This equipment cost \$18,000 originally and had a book value of \$8,500 at the time of sale.

1. All depreciation expense, \$14,500, is in the operating expenses.

1. All sales and purchases are on account.

Instructions

1. a) Prepare a statement of cash ﬂows using the indirect method.

1. b) Compute free cash ﬂow.

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